1)the "economic unhealthy" tag for franchises aren't exactly true. Look at the Dow Jones industrial average on the stock market -- the 30 companies listed have an average yield of 3%. This means for every 100 dollars in investment, the stock PAYS $3 a year. While that is nice, it is obviously the ownership from an investment standpoint where the strongest gains hope to come from. Taking the 3% average -- for the statistical mean NHL franchise (worth $240 million according to Forbes) - the equivalent of the dividend payouts would be about 7.6 million a year.

Now clearly most teams are still underneath this value -- but I think this shows it is unreasonable to expect a business to have returns the likes of what the Leafs (income of $82 million), Rangers ($41 million) and Montreal ($48 million) pull in. In this light, even Vancouver ($23M), Edmonton($17M), Detroit ($16M) and Chicacgo ($9M) range from very good to respectable. Other teams on the line such as Boston and Philly (making money) to Carolina and Washington (losing money) -- these team had all made operating decisions (in one way or another) to place a higher priority for on-ice performance instead on what the balance sheet says. Easily put - they didn't have to spend like they did if they were interested in profit. Are we really supposed to pity Minnesota and say they are broken when they go out and spend like they did this summer?

My feeling is the regular dollars and cents, at least as far as an investment goes, never would be there to begin with. If an investment that cost $240,000,000 had the only benefit of returning under $8 million a year (3% - remember) --- most financial analysts would put that as a poor investment. Sure - makes money but that would almost be the same as buying bonds.

The true value for an NHL franchise is the appreciation -- something that has continued to flourish post-lockout with the average franchise appraisal value (again, according to Forbes) increasing 47%.

This is where my disconnect with the owner's position and their unwillingnes to negotiate comes from

Well, its unfair to compare the NHL or any sports leagues to a regular business. The main commodity (players) is actually an expense you get zero tangible related dollars back. The revenue is not directly related to the return on the product. Its what makes it such a difficult business model to begin with. Also, add into it bylaws of a governing company (the league) and you have a product you can not compare.

You state yearly %'s to company value, but that does not relate to sports. Most companies worth $200 million in value are not running $125 million yearly revenues and balancing those to try to manage expenses that can grow to half of their company value. Sports does, its a huge difference.

That being said the reality still is 20 teams lose money, a handful make a bit and a handful make a lot so I am not really understanding the general comparison of %'s of return. But in your post you site only the examples that fit the % model, not the 22 or 23 that come in under your stated %'s.

That changes the thought process right there without even having to acknowledge that huge differences in sports business models.

Franchise value:I dont disagree to a point, however I think the NHLPA is aware of this, as are other leagues and like many are revenue generators (non HRR) its not a huge sticking point. Values that are listed do not point accurately to sales price especially in the NHL, teams like the Penguins who were bought at rock bottom prices, got two franchise players and a new building increased an average of about $10 million per year over 14 years (if you include how low they were bought) and that is not a huge number if you think about it and how high their losses were combined with how low they were running the franchise pre Crosby.

Franchise values seemed to increase a lot since the last lockout but remember, they were coming from a dark period financially for a lot of teams overall in the leagues. That is artificially showing increases based on the low original value and that will not sustain.

Anyways the point really is for me that the league is only asking for a 7% rollback in salaries to help most franchises become viable, along with some contract stipulations to avoid loopholes. Even with all of that a lot of teams will be struggling to compete. Too many teams carried losses that were more than their franchise value and too many teams do not see a large increase in their value as the numbers can be misleading based on some larger franchises. In the end it can be a revenue source but with 20 teams losing money and some a ton of money it is simply a way to recoup some losses but not nearly all

- while the 57% and HRR do not tell the entire story, non HRR and franchise value for most teams help but are not a saving grace. If they were they NHLPA and other leagues would make a huge deal of this.

by interstorm on Sun Nov 25, 2012 7:00 am

Bathgate wrote:Massive deficit spending and printing money to sustain it cannot continue for many more years without a meltdown of some sort.

I fear going off topic here -- not what I intend and so I won't look to hold a separate discussion (at least in this thread) here. Just want to say that we, as a country, have encountered higher debt (as a percentage of GDP) than what we're dealing with now. Coming out of WW2 we were saddled with a great debt - with responsibility it was brought down. Only 10-15 years later was a period many people would reflect on as a "Golden Era" in this country. The pundits (both right and left wing) in the media are always stating otherwise -- for the most part, they should be tuned out as they aren't providing warning or solutions...they're just looking for followers, ratings and -- at the end of it all -- money for their own pockets. They're entertainment...nothing more. http://visual.ly/united-states-debt-per ... -1940-2012

That was a pretty political post on the economy, so related to just the NHL and franchise value - I think the point is the economy is not great and it could effect teams overall value eventually which is why you relate salaries to revenue and why it works. Just like any industry there is no way it can sustain an increase of that magnitude very long, it wont last.

In my opinion this is a solid reason to underscore the franchise value issue. Reason being the NHL wants players salaries (like the NFL and NBA) directly related to revenue, period. This is very fickle industry run on very fickle yearly budgets. Making a $7 million profit on a $110 million budget is nice but is tight enough that it can turn to a minus $7 million very quickly. I mean very quickly. Do the math on $100 tickets, $50 tickets, food and booze, parking and see how a downturn in attendance can hit a team very hard. Again, franchise value is nice but it cant be counted on and economy is one perfect example of why.

Bathgate wrote:Massive deficit spending and printing money to sustain it cannot continue for many more years without a meltdown of some sort.

I fear going off topic here -- not what I intend and so I won't look to hold a separate discussion (at least in this thread) here. Just want to say that we, as a country, have encountered higher debt (as a percentage of GDP) than what we're dealing with now. Coming out of WW2 we were saddled with a great debt - with responsibility it was brought down. Only 10-15 years later was a period many people would reflect on as a "Golden Era" in this country. The pundits (both right and left wing) in the media are always stating otherwise -- for the most part, they should be tuned out as they aren't providing warning or solutions...they're just looking for followers, ratings and -- at the end of it all -- money for their own pockets. They're entertainment...nothing more. http://visual.ly/united-states-debt-per ... -1940-2012

You said it: "Coming out of WW2". That means it ENDED, and the massive deficit spending stopped. There is little chance that our present politicians will even significantly slow our current deficit spending. As for CNN, as a liberal-biased outfit, it is not surprising they would come out with a spin story to protect the Dear Leader from criticism of his zealous entitlement spending and where it's taking us.

Regarding the Pens and hockey, Mario and the owners have to be wary of a meltdown and a major depression because spending on sports entertainment is a luxury, not a necessity. If I owned a ML team, I'd be looking to sell it ASAP.

Bathgate wrote:Massive deficit spending and printing money to sustain it cannot continue for many more years without a meltdown of some sort.

I fear going off topic here -- not what I intend and so I won't look to hold a separate discussion (at least in this thread) here. Just want to say that we, as a country, have encountered higher debt (as a percentage of GDP) than what we're dealing with now. Coming out of WW2 we were saddled with a great debt - with responsibility it was brought down. Only 10-15 years later was a period many people would reflect on as a "Golden Era" in this country. The pundits (both right and left wing) in the media are always stating otherwise -- for the most part, they should be tuned out as they aren't providing warning or solutions...they're just looking for followers, ratings and -- at the end of it all -- money for their own pockets. They're entertainment...nothing more. http://visual.ly/united-states-debt-per ... -1940-2012

You said it: "Coming out of WW2". That means it ENDED, and the massive deficit spending stopped. There is little chance that our present politicians will even significantly slow our current deficit spending. As for CNN, as a liberal-biased outfit, it is not surprising they would come out with a spin story to protect the Dear Leader from criticism of his zealous entitlement spending and where it's taking us.

Regarding the Pens and hockey, Mario and the owners have to be wary of a meltdown and a major depression because spending on sports entertainment is a luxury, not a necessity. If I owned a ML team, I'd be looking to sell it ASAP.

Question on cap circumvention deals. Would it be propper to allow a team 1 maybe 2 circumvention deals. But not done in the old illegal ways. If you look at the players with these types of long deals with dead years at the end. What if you allowed a team to label a player a "franchise" player where that player get a 10% or 15% cap softening the hit. I mean that is the whole idea to lower the cap hit and allow that player to retire in that city.

EX. you sign a player to a 8 year 80 million deal (10 mil a season) would only count as a 8.5 cap hit.

You can control this by if the player is traded he loses the 15% hit. there for the other team has a 10 mil added to their cap.

Whitney basically called the architects of cap-circumvention deals geniuses. The NHL didn't see it that way when the fined the Devils.

I think at the root of the cap circumvention deals is where Fehr has staked his claim. If there is an existing structure that allows abuse of the cap system and gives and advantage to people that want to spend money on players, then he does not want that loophole closed.

I think what the players don't get is that even clubs that didn't traditionally do deals like that, have been forced into them now. This just means that the cap is artificially lower than it actually seems which is bad for parity. The cap was designed to keep all teams within a certain ballpark on spending for their rosters. If the system stays the same over the next few years, the teams with the most money will maximize their exploitation of the loopholes and gain an advantage over teams that are less financially endowed or simply have more respect for the spirit of how the cap is supposed to work. This isn't good for the game. The cap is good for the game.

Last edited by pens_srq on Sun Nov 25, 2012 9:56 pm, edited 1 time in total.

no name wrote:Question on cap circumvention deals. Would it be propper to allow a team 1 maybe 2 circumvention deals. But not done in the old illegal ways. If you look at the players with these types of long deals with dead years at the end. What if you allowed a team to label a player a "franchise" player where that player get a 10% or 15% cap softening the hit. I mean that is the whole idea to lower the cap hit and allow that player to retire in that city.

EX. you sign a player to a 8 year 80 million deal (10 mil a season) would only count as a 8.5 cap hit.

You can control this by if the player is traded he loses the 15% hit. there for the other team has a 10 mil added to their cap.

I thought this would be good for the players and GM/owners.

You could do that but what about this. How about give teams a cap break if they sign a player that has been on their team for their whole career? Or better yet, if a player has been with a team for 5 years and signs another deal, then the cap hit is lowered. This gives players a sort of advantage for sticking with the same team, also makes it easier to keep them. Then keep the UFA age the same and teams will likely pay more to keep a player as long as it doesn't hurt the cap.

no name wrote:Question on cap circumvention deals. Would it be propper to allow a team 1 maybe 2 circumvention deals. But not done in the old illegal ways. If you look at the players with these types of long deals with dead years at the end. What if you allowed a team to label a player a "franchise" player where that player get a 10% or 15% cap softening the hit. I mean that is the whole idea to lower the cap hit and allow that player to retire in that city.

EX. you sign a player to a 8 year 80 million deal (10 mil a season) would only count as a 8.5 cap hit.

You can control this by if the player is traded he loses the 15% hit. there for the other team has a 10 mil added to their cap.

I thought this would be good for the players and GM/owners.

You could do that but what about this. How about give teams a cap break if they sign a player that has been on their team for their whole career? Or better yet, if a player has been with a team for 5 years and signs another deal, then the cap hit is lowered. This gives players a sort of advantage for sticking with the same team, also makes it easier to keep them. Then keep the UFA age the same and teams will likely pay more to keep a player as long as it doesn't hurt the cap.

A loyalty clause like that would be good for the league. There is already so much player movement. A team that drafts good players should be rewarded for it. Losing players is hard with the richer teams ready to gobble them up when they reach UFA age.

Noise wrote:I don't know why you guys are talking about politics. All the arguing between left & right is pretty silly when there's a hockey lockout.

(And the real problem is that our economy is centered around scarce raw materials that keep rising in price & will run out possibly before most of the world is ready for it)

As Bio pointed out, we were really talking about economics. It is a hard topic to keep quiet on (as you even chimed in with). I admit I didn't read much of the long reply to me, though, as at some point the line between "on topic" and "off topic" gets blurred (often around long posts like that).

All I was saying is that the NHL business yearly returns are not far outside (and sometimes better than) an equivalent investment in the average Dow Jones stock. In addition to this, NHL franchise values, as posted by Forbes, has actually beaten the Dow since the lockout (43% average increase for NHL, 19.60% increase for Dow since 11/28/2005). There is NOTHING wrong with the economics of most NHL franchises. And again, since I think it is relevant - how are teams that lose money but spend big considered a flawed business? Minnesota "lost" almost 6 million dollars last year- we saw what they did in the offseason. Am I supposed to feel bad for them as a business?

Yes- players need to get in line but I think they are willing to go 50/50 AND expect the NHL to honor all (or most of) existing agreements (contracts) at stated dollar value (not a reduction based on lower HRR). I also think it is virtually needed by them to draw a line so the NHL understands what they'll be up against at the next CBA (in the hopes the owners themselves fear the destruction yet another lockout would cause).

I always wondered how much they pay the terrorist. Well. It's $3 million dollars a year. I started laughing when I read that because this guy is making $3m and players will probably lose a whole year's worth of salary. lmao.

Sarcastic wrote:I always wondered how much they pay the terrorist. Well. It's $3 million dollars a year. I started laughing when I read that because this guy is making $3m and players will probably lose a whole year's worth of salary. lmao.

And yet another person forgets that he's not getting paid until the lockout is over... :face:

btw, I didn't realize he was such a hardass (looking at wiki). What these players expected, I don't know.

"With the NHL locking out at midnight on September 15, 2012, Fehr has become the only Executive Director to be directly involved in work stoppages in two sports. Six of the eight contract negotiations he has been involved in have resulted in work stoppages, including five consecutive negotiations between the MLBPA and Major League Baseball. [10]"

I honestly think he thought he could pressure the owners to cave in, but he has clearly met his match. They are smarter and tougher than he is. I will also add that nobody better blame the NHL for the lockout. This guy, according to an earlier article I posted, refused to meet with the NHL regarding the CBA for 18 months after he was hired. At first I thought he really didn't know the business and had to "study", as he said, but now I'm thinking that 18 months is too long a time. I believe this was a tactic he used to appear only at the last moment to try to put extra pressure on the owners thinking they'll sign anything to avoid a lockut. Well, the joke is on him the players.

Sarcastic wrote:I always wondered how much they pay the terrorist. Well. It's $3 million dollars a year. I started laughing when I read that because this guy is making $3m and players will probably lose a whole year's worth of salary. lmao.

And yet another person forgets that he's not getting paid until the lockout is over...

But he will get paid at a rate of $3 million, isn't he? So what's the difference? He will get paid. Players will not (for the missed season). Or do I get that wrong? As the post below, any scenario where he doesn't get paid?